Two Charged With Insider Trading Over 2009 IBM Deal

Two former stock brokers at a
Connecticut financial services company were charged with insider
trading on Thursday over a 2009 acquisition by computer giant
IBM Corp.

Two former stock brokers at a
Connecticut financial services company were charged with insider
trading on Thursday over a 2009 acquisition by computer giant
IBM Corp.

U.S. authorities said Thomas Conradt, David Weishaus and
three unnamed colleagues made more than $1 million in illicit
gains by trading in shares of SPSS Inc before IBM agreed on July
28, 2009, to buy the Chicago-based software company for $1.2
billion.

Prosecutors said the alleged scheme started with a tip from
an associate at the New York law firm that represented IBM in
the transaction. Prosecutors did not name the law firm, but
regulatory documents listed Cravath Swaine &Moore as counsel to
IBM in the deal.

"Thomas Conradt, David Weishaus and their co-conspirators
engaged in a chain of illegal tipping simply because they wanted
to get rich quick," U.S. Attorney Preet Bharara in Manhattan
said in a statement.

Conradt, 34, is a lawyer living in Denver, while Weishaus,
32, lives in Baltimore. Both were formerly employed at Euro
Pacific Capital Inc, a Westport, Connecticut-based firm,
according to the Financial Industry Regulatory Authority.

Sharon Feldman, a lawyer for Conradt, did not immediately
respond to a request for comment. Michael Grudberg, a lawyer for
Weishaus, declined to comment.

Conradt and Weishaus were arrested on Thursday morning, an
FBI spokesman said. Each was charged with three counts of
securities fraud and one count of conspiracy in an indictment
unsealed in U.S. District Court in Manhattan.

If convicted, they face up to 20 years in prison and a $5
million fine on each of the securities fraud counts.

The U.S. Securities and Exchange Commission filed related
civil fraud charges against both men.

KEEPING IT IN THE FAMILY

IBM agreed to pay $50 per share for SPSS, a 42 percent
premium to SPSS' closing price on the day before the purchase
was announced.

According to court papers, Conradt's roommate, an Australian
equities analyst, had learned about the pending acquisition from
a close friend, a New Zealand citizen who worked as an associate
at the New York law firm.

Investigators said Conradt then tipped Weishaus, who in turn
tipped three colleagues, who were not named in court papers.
These five people placed the various improper trades in SPSS
stock and options, according to the court papers.

The indictment outlines a series of instant messages
involving the defendants that prosecutors said reflect their
involvement in the improper trades.

In one exchange, according to the indictment, Conradt on
July 1, 2009, told Weishaus, "jesus, don't tell anyone else ...
we gotta keep this in the family".

Weishaus then said, "i dont want to go to jail," and said
"martha stewart spent 5 months in the slammer," referring to the
homemaking doyenne, who was convicted in 2004 on charges of
lying to investigators about a stock sale. He also alluded to an
SEC insider-trading case against Mark Cuban, the billionaire
owner of the Dallas Mavericks pro basketball team.

The criminal case is U.S. v. Conradt et al, U.S. District
Court, Southern District of New York, No. 12-cr-00887. The SEC
case is SEC v. Conradt et al in the same court, No. 12-08676.